Leases, Codification Topic 842

12 Months Ended

Aug. 31, 2025

We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (i) the right to obtain substantially all economic benefits associated with an identified asset and (ii) the right to direct how and for what purpose the identified asset is used. Certain service agreements may provide us with the right to use an identified asset; however, most of these arrangements are not considered to represent a lease as we do not control how and for what purpose the identified asset is used.

We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our leases are primarily for railcars, equipment, vehicles and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options.

Right of use assets and liabilities for operating and finance leases are recognized under ASC Topic 842 at the lease commencement date for leases in excess of 12 months based on the present value of lease payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants.

Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Consolidated Statements of Operations as of August 31, 2025, 2024 and 2023, are as follows:


	2025		2024		2023
	(Dollars in thousands)
Operating lease expense	$	95,551	$	84,826	$	77,588
Finance lease expense:
Amortization of assets	12,831		9,506		8,966
Interest on lease liabilities	2,256		1,964		1,646
Short-term lease expense	30,078		25,753		20,068
Variable lease expense	50		833		650
Total net lease expense*	$	140,766	$	122,882	$	108,918

*Income related to sublease activity is not material and has been excluded from the table above.

Supplemental balance sheet information related to operating and finance leases as of August 31, 2025 and 2024, is as follows:


	Balance Sheet Location	2025		2024
		(Dollars in thousands)
Operating leases
Assets
Operating lease right of use assets	Other assets	$	238,718	$	218,844
Liabilities
Current operating lease liabilities	Accrued expenses	$	70,801	$	61,796
Long-term operating lease liabilities	Other liabilities	170,604		161,494
Total operating lease liabilities		$	241,405	$	223,290

Finance leases
Assets
Finance lease assets	Property, plant and equipment	$	71,773	$	63,229
Liabilities
Current finance lease liabilities	Current portion of long-term debt	$	10,447	$	7,116
Long-term finance lease liabilities	Long-term debt	44,751		42,395
Total finance lease liabilities		$	55,198	$	49,511

Information related to the lease term and discount rate for operating and finance leases as of August 31, 2025 and 2024, is as follows:


	2025		2024
Weighted average remaining lease term (in years)
Operating leases	4.8		5.1
Finance leases	7.1		8.6
Weighted average discount rate
Operating leases	4.19	%	3.85	%
Finance leases	4.24	%	3.99	%

Supplemental cash flow and other information related to operating and finance leases as of August 31, 2025, 2024 and 2023, is as follows:


	2025		2024		2023
	(Dollars in thousands)
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	85,976	$	78,614	$	71,798
Operating cash flows from finance leases	2,256		1,964		1,646
Financing cash flows from finance leases	9,772		7,716		8,571

Supplemental noncash information:
Right of use assets obtained in exchange for lease liabilities	$	89,158	$	73,183	$	69,837
Right of use asset modifications	25,475		12,277		28,614

Maturities of lease liabilities by fiscal year as of August 31, 2025, are as follows:


	August 31, 2025
	Finance Leases		Operating Leases
	(Dollars in thousands)
2026	$	10,984	$	75,886
2027	9,356		61,124
2028	8,227		44,889
2029	7,845		30,063
2030	7,046		19,854
Thereafter	22,289		34,643
Total maturities of lease liabilities	65,747		266,459
Less amounts representing interest	10,549		25,054
Present value of future minimum lease payments	55,198		241,405
Less current obligations	10,447		70,801
Long-term obligations	$	44,751	$	170,604

CHS INC 10-K